We are witnessing the end of Europe as we know it and the change may not be pleasant. Europe is now at a crossroads with two paths to consider, neither ending happily. The first is simply to end the Euro experience. The second is a Germany dominated Economic Europe combined with more bureaucratic control over individual countries for the only way the Euro is to work the way the founders want it is simply for the European Union take over the economic decisions of countries involved.
The Euro was designed to facilitate tighter economic integration and force a converging of various European nations. But, trying to economically unite nations as diverse as Greece with the thrifty Germans has proven a failure. As the past decade has shown, the only way this would have worked is if there was a more powerful central government running Europe and thus the rub. The idea of a strong central European Union run from Brussels would have met a less democratic Europe as the present European Union has shown. Nor necessarily would a stronger economic Europe be the result.
If nothing else, the European Union has hardly been willing to listen to voters. If a nation rejected the Euro and inclusion into the European Union, the European elites have simply forced the nation to keep voting until they got the result desired and the recent Greece crisis has shown, the Greeks were told either you do what you are told or else you go under. The Greeks have been profligate with their economic policy and Greece was at a point of no return as their debt levels were too much to handle but when the Greece government wanted a referendum on the program they were asked to carry out, the European masters said no and forced the government to collapse. There was and is still no doubt that Greece needs massive reforms but without the support of those governed, the reforms are doomed. Another problem with the various austerity programs is that while budget cuts and wage cuts are enacted, there is very little incentives for those with money to stay as massive tax increases are enacted as well. With no tax reduction on investments or the producer class, there is very growth oriented policy and with Greece tied to the Euro, the average Greece will continue to see their daily income declining.
The problem originally was that the Euro allowed reckless nations like Greece to borrow money at lower interest rates but there was no option to devalue their own currency to adjust and as National Review Online Ramesh Ponnuru noted, “The economies of France and Germany are so large that a policy designed for the euro zone as a whole would inevitably be a better fit for their needs than for those of the countries on the zone’s periphery. But the European Central Bank has given Germany’s economy even more weight than its size alone would suggest. The Barclays Capital report found that European monetary policy since 1999 “has tended to correspond more closely with German economic conditions than for the euro area as a whole.”
Ramesh Ponnuru added that a looser monetary policy could lead to inflation in Germany and France whereas those weaker nations will have to see lower real wages if there is no additional expansion of monetary policy by the European Central Bank. Ponnuru asked if the various weaker nations would have been better if they would have been allowed to devalue their currencies and as he theorizes, “Taxpayers wouldn’t be facing pleas for bailouts.”
The real issue is that for past decades, the European elites have forced an experiment upon much of Europe and they often treated opposition as “spasms of irrationality” as Ponnuru noted. The goal was European unity but now European unity is at risk as many German taxpayers are wondering it is worth the effort to subsidize their more reckless neighbors and others are balking at the conditions imposed. The elites are now going for more integration but as Ponnuru, maybe it is time for less integration as he observed that maybe Germany and France along with the other more wealthy northern neighbors creating their own currency and allowing their southern neighbors to slip away Ponnuru conclude, “The wiser course is to ditch the euro. The countries in the most trouble can’t leave it because their first whisper would trigger widespread bank runs. If Germany and like-minded nations want to avoid either inflation or bailouts, they themselves should leave en masse — creating a new northern European currency covering a more economically cohesive area. The remaining euro countries could then adopt a realistic exchange rate in relation to this new currency.”
That is the rub, ditch the Euro and there is the possibility of bank runs and more economic dislocation. The other option is a less democratic Europe dominated by a resurgent Germany and backed by a increasing more powerful bureaucratic European union. As a recent report in Daily Express reported, “Britain will soon be forced to scrap the pound and join the euro, one of Germany’s most senior figures said yesterday. In a chilling threat to UK sovereignty, German finance minister Wolfgang Schauble predicted that all Europe would one day use the single currency. ‘Will happen perhaps faster than some in the British Isles currently believe,’ he said. His sinister warning followed the emergence of a secret German plan to build a powerful new economic government for the Eurozone and block an EU referendum in Britain.”
The European elites want to eliminate nationalism and control all aspects and an independent Great Britain represents a threat to their own control. From this point, Europe has very few good options but Europe may be forced to a more decentralized union which based on each nation determining their own fate, unified by free exchanges of goods across the border. It will mean that Greeks will still be economically stupid and force to suffer the consequences of their decisions but it won’t threaten the whole of Europe. It could also mean a freer Europe.